M&B has reported for the half year to 12 April 2014 with like for like sales growth of 1.1%, total revenue up 2.5%.
Numis Securities takes a positive overall view, commenting that ‘The company is under-performing its peers, but is gradually turning around (LFL volumes are now flat, having been down over 5% in H1 2013)’ and ‘Operational progress appears slow, but with net debt falling and the pension negotiations now complete, dividends could resume this autumn’.
M & B is rumoured to be interested in acquiring Orchid Pubs which, if it took place, could make analysts take a close look at its strategy and prospects.
Alistair Darby, Chief Executive, commented on the results:
“We are pleased with our trading performance in this first half, particularly the turnaround in volumes, alongside which we have made good progress against our key priorities, and continued to position Mitchells & Butlers for sustainable long-term future growth.
“Successful resolution of the recent triennial pensions valuation, which we are announcing today, provides greater visibility and certainty over future funding and cash flow, at an affordable level.
“Our business transformation is gaining momentum. Through our clearly laid-out strategy, we are well-placed to take advantage of the economic recovery across the UK.”
Statutory results
- Profit before tax: £68m (H1 2013: £68m)
- Basic earnings per share: 12.9p (H1 2013: 13.4p)
Financial performance
- Total revenue of £1,016m, up 2.5%
- Like-for-like sales growth of 1.1%
- Adjusted operating profit of £147m, up 2.1%
- Adjusted earnings per share of 14.6p, up 1.4%
- Net cash flow of £43m
Balance sheet and cash flow
- Agreement reached with Trustees on 2013 pensions valuation. Deficit increased to £572m as at March 2013; annual contribution increased to £45m (previously £40m per annum)
- Capital expenditure increased to £86m (H1 2013: £59m), including 11 new site openings and 4 conversions
- Net debt of £1.7bn representing 4.1 times annualised EBITDA
Operational performance
- Turnaround in volume performance: like-for-like food volume growth (H1 2014:+0.2%, H1 2013: -4.7%), drink volume stabilising (H1 2014:-0.3%, H1 2013: -6.0%)
- Operating margin maintained at 14.5%
- EBITDA returns of 16% achieved on expansionary capex invested since FY 2011
- Staff turnover at historical low of 78% and net promoter score growing strongly to 63%